The UK housing market stumbled to the end of 2025, as the latest figures from the government’s House Price Index revealed a monthly dip in values and a slowdown in momentum across much of the country. Average house prices fell by 0.7% in December, underscoring a subdued close to the year, even as annual growth remained in positive territory at 2.4%, taking the typical property value to £270,000. Ian Futcher, financial planner at Quilter, provides deeper context and highlights that the market slowdown was driven by uncertainty around tax and housing measures, as well as the typical seasonal lull.
The housing market saw a disappointing end to 2025, according to the government’s latest house price index, with the average UK house price falling by 0.7% in December. On an annual basis, prices rose by 2.4%, bringing the average property price to £270,000.
This morning’s data reveals house prices in London fared the worst in 2025, making it the only UK region to have seen a fall on an annual basis. Prices lowered by 1%, bringing the average house price to £551,294. Comparatively, the North East saw growth of 4.6%.
This data captures the combined impact of the budget, which saw many households put moving plans on hold towards the end of the year as they awaited certainty around tax and housing measures, as well as the typical Christmas and New Year lull. This resulted in housing market activity stalling in the final few months of the year, and a subsequent lack of momentum in prices.
It’s worth noting that the government’s house price index is a lagging indicator, and we have since had reports that 2026 has got off to a slightly better start – albeit still relatively subdued. Halifax recently reported that the average house price has now crossed the £300,000 threshold. This will be welcome news for existing homeowners but leaves first time buyers with even greater affordability challenges.
While mortgage rates have eased from their highs, affordability remains a key issue and many are still facing the prospect of a sharp jump in their monthly repayments when they come to remortgage or secure a new deal. However, lenders are increasingly competing for the limited custom, and we are regularly seeing pricing tweaks and new product launches which could bring more options for prospective buyers.
The path ahead for Bank of England rate cuts will likely shape housing market activity. Some now expect the next rate cut could come as soon as March, with the potential for another later in the summer. Any improvement in affordability is likely to be gradual, which should keep price growth steady.”
